ACEco is a foreign corporation that manufactures widgets and resides in Country Y. ACEco also manufactures widgets in the United States through a U.S. limited liability company that is treated as a disregarded entity for U.S. tax purposes i.e., a U.S. branch of ACEco. During the current tax year, the U.S. branch had effectively connected earnings & profits (E&P) of $2,000,000, and its U.S. net equity was $500,000 at the beginning of the year and $1,700,000 at the end of the year.

ACEcos total worldwide liabilities, including U.S. booked liabilities, were $6,000,000 on which it had paid interest of $375,000 to a bank in Country Y, while ACEcos U.S. booked liabilities were $2,000,000 on which it had paid interest of $150,000 to a bank in Country Y.

During the year, the value of ACEcos U.S. assets producing effectively connected income were $4,000,000, while the value of ACEcos worldwide assets, including U.S. assets, were $24,000,000.

(a.) For U.S. tax purposes, compute the U.S. branchs dividend equivalent amount and branch profit tax for the current tax year. Assume that the United States does not have an income tax treaty with Country Y.

(b.) For U.S. tax purposes, what is the maximum interest expense deduction that may be taken by the U.S. branch for the current tax year? Does the payment or deduction of interest expense by the U.S. branch trigger a U.S. tax liability? If so, please identify the type of tax and the amount of tax triggered. Again, assume that the United States does not have an income tax treaty with Country Y.